Question
a. Choosing an appropriate source of business finance can be a difficult and time-consuming task. This is due to the sheer amount of funding options
a. Choosing an appropriate source of business finance can be a difficult and time-consuming task. This is due to the sheer amount of funding options available. Financing can come in the form of debt or investment, and finance terms can vary significantly. The criteria and implications of EXAMINER: Samuel Gameli Gadzo Page 4 of 4 each source require critical analysis before proceeding, and it is essential to weight the cost versus benefits of each source before making a decision. Required: i. Discuss FOUR (4) factors that a company should consider when choosing a source of debt finance. (6 marks) ii. Explain THREE (3) factors that may be considered by providers of finance in deciding how much to lend to a company. (3 marks) b. A company with 40 million shares in issue announces a 2 for 5 rights issue at a price of GH6 per share. The market price of the existing shares before the rights issue is GH7.40. Required: i. What is the theoretical ex-right price? (3 marks) ii. What is the theoretical value of the rights? (3 marks) (Total: 15 marks)
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